Our recent Client Alert discusses a much-publicized keynote address by SEC Chairman Paul S. Atkins at the University of Delaware’s John L. Weinberg Center for Corporate Governance. While formal rulemaking is stalled due to the government shutdown, his comments signal possible reforms relating to shareholder proposals and shareholder litigation.

Apart from highlighting a path by which companies may seek to exclude precatory shareholder proposals, Chairman Atkins made clear that the SEC is reassessing Rule 14a-8 as part of its rulemaking agenda. He indicated that he asked the staff to evaluate whether the SEC’s original rationale in adopting the rule in 1942 still applies today, which could suggest that the SEC may propose significant changes in this area. In addition, he suggested two potential tools for addressing “meritless, vexatious, or frivolous” shareholder litigation: mandatory arbitration provisions and fee-shifting provisions.

Chairman Atkins’s speech, along with the SEC’s Policy Statement on arbitration provisions a few weeks prior, is spurring discussion about corporate governance and the appropriate policies for smoothing access to U.S. capital markets. Many companies will want to follow these developments and the ongoing conversation, while being mindful of the legal complexities associated with some of the proposed solutions.